the evolution of the dubai hotel sector 19 01 15
TRANSCRIPT
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The Evolution of Dubai’s Hotel Market 22/01/15, Sharq Village & Spa, Doha, Qatar. Presenter: Guy Wilkinson
Dubai holds the Guinness World Record for the highest ever firework display
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Viability Management Consultants
• Hospitality and real estate development consultancy • Established in Dubai in 2006 • Principals have consulted in every country in the Middle East
except Iraq, as well as many in Africa • Specialized in providing:
– Bankable feasibility studies – Market studies in a variety of hospitality-related sectors – Operator selection and contract negotiations – Operational reviews and interim management solutions
• Reputation for high-quality, detailed, realistic advice
“Truly an expert consulting company.” “…a most valuable contribution to our knowledge base.” “All responses from Viability were exceptionally prompt and pertinent.”
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Consulting Services • Market & financial feasibility studies
• Market & financial ‘highest & best use’ studies
• Market & financial pre-feasibility studies
• Market studies
• Operator selection
• Management contract negotiations
• Business valuations
• Operational reviews
• Interim management
• Broking
Real Estate Sectors • Hotels & resorts
• Serviced apartments & villas
• Timeshare, fractional, condo suites/apartments
• Residential apartments, villas, townhouses
• Commercial o!ces
• Shopping centres
• Leisure & entertainment centres/attractions
• Food & beverage outlets, health clubs, spas, etc
The Address Downtown Dubai (feasibility study by Guy Wilkinson)
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Amazing Dubai, City of Records!
• Dubai holds the Guinness World record for staging the largest ever firework display on New Year’s Eve in 2014, with 400,000 fireworks being launched during a 6-minute show on The Palm and The World
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More Dubai Record Trivia!
• At 828 metres and 163 storeys, the Burj Khalifa is the world’s tallest man-made structure on land, with the ‘highest restaurant’ and the highest base jumping record
• Dubai boasts the 5 tallest hotels in the world: 1) the JW Marquis (355 m), 2) the Rose Rayhaan (333 m), 3) the Burj Al Arab (321 m), 4) the Jumeirah Emirates Towers (309 m) and 5) The Address Downtown Dubai (306 m)
• The 306 m, 80-storey Cayan Tower in Dubai Marina is the world’s tallest building with a twist of 90o
• Dubai Mall is the most visited shopping centre in the world with 75 million visitors in 2013
• Dubai Metro is the world’s longest driverless metro with 2 lines and 75 km of track
• The Dubai World Cup is the world’s richest horse race, with a purse of US$ 10 million
JW Marquis Hotel Dubai
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3000 BC Nomadic
cattle herding
3rd Century Sassanid
Empire, date palm
cultivation
7th Century Ummayad
trading post
1500s Pearling &
fishing centre
1799 Bani Yas
dependency
1820 General Maritime
Peace Treaty w/
Britain
1833 Maktoum dynasty begins
Dubai Timeline 1 – Early History
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1853 Trucial States established
1892 British
Protectorate
1894 British
tax-free entrepot
1903 British steam ship port
1912 Sheikh Saeed
accedes
1958 Sheikh Rashid
accedes, DNATA
launched
1963 Dredging
the Creek
Dubai Timeline 2 – Trucial States Era
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1966 Oil
discovery
1969 First oil
shipment
1971 UAE
formed
1973 Dirham
introduced
1979 Jebel Ali Port &
Free Zone opened
1985 Emirates Airline
launched
1989 Dubai
Commerce & Tourism
Promotion Board formed
Dubai Timeline 3 – The Oil Era
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1990 Sheikh
Maktoum accedes, First
Gulf War
1997 DCTPB
becomes Department of Tourism & Commerce Marketing
2002 First freehold for foreigners zone launched (Dubai Marina)
2003 Dubailand launched
2006 First houses on The Palm,
Jumeirah occupied
2006 Sheikh
Mohammed accedes
Dubai Timeline 4 – The Real Estate Revolution
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2008 Global
Recession, Dubai Mall
and Atlantis opened
2009 Dubai Metro
Red Line inaugurated
2010 Burj Khalifa inaugurated
2014 DXB overtakes Heathrow as
world’s busiest passenger hub
2015 Dubai World restructures its US$14.6 billion debt
2020 Dubai to
host World Expo
Dubai Timeline 5 – Into the Future
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Enlightened Leadership
• Seeds of ‘Dubai Inc’ sown in early 19th century (anticipating modern semi-state companies like Emirates, Emaar, Jumeirah, etc)
• Sheikhs Maktoum and Mohammed expanding on the vision of their father, Sheikh Rashid
• UAE federal structure allows much autonomy for 7 Emirates
• Old-fashioned monarchy avoids many of the hassles and pitfalls of democracy, e.g., nobody objects to planning permission!
• Careful balancing act between traditional eastern and modern western values, including sagacious ‘blind eye’
• ‘Charmed life’ in conflict zone thanks to moderate stance and clever behind-the-scenes diplomacy and security
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Strong Economic Base
• Trading history dates back to ancient times, but especially 19th century • Strategic location near Iran and India, in ‘centre’ of globe • Free zone initiative launched in 1985 with JAFZA (now home to 7,500
companies, inc 150 of Fortune 500), followed by >20 others including: – Dubai Internet City – Dubai Media City – Knowledge Village – Dubai International Financial Centre – Dubai Silicon Oasis – Dubai Multi Commodities Centre – Dubai Maritime City – Dubai Textile City – Dubai Flower Centre – Gold & Diamond Park – Dragonmart
• Why do they work when other countries have failed? – E"ective government investment to ‘prime the pump’ – Excellent international promotion (e.g., through DTCM) – Full commitment to ensure benefits – no tax or duties, 100% ownership
for foreigners (no sponsor), no restrictions on repatriation of profits, etc – Safe haven appeal for investors from unstable neighbouring countries
Dubai Internet City
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The Iranian Connection
• Links with Iran date back to Sassanid empire in 3rd century
• Strong ties especially with Bandar Lengeh, Bastak and Hormozgan Province on southern Iranian coast
• Bastakiyah wind towers brought by Bastakian traders
• Al Futtaim, Galadari, Al Habtoor, Al Gurg and other top Dubai trading families are of Iranian descent
• Other historic links of local population with Yemen, Baluchistan, Zanzibar
Wind tower house in Bastakiyah, Dubai
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Real Estate Revolution
• Pre 2002: Traditional pattern of business and property ownership exclusively by UAE nationals: – 51% sponsor ownership system for companies – Expatriate housing for rent only
• 2002: Creation of special zones in which foreigners could buy houses “freehold” (or 99-year lease)
• A logical extension of the free zone concept • Sales combined with residence visas (not any
more) and mortgages • Key freehold-for-foreigners zones include:
– Dubai Marina, inc Jumeirah Beach Residence – Jumeirah Lake Towers – The Palm, Jumeirah – TECOM – ‘New Dubai’ (Emirates Hills, The Meadows, The
Springs, The Lakes, Jumeirah Islands, etc) – Downtown/Business Bay – Dubai International Financial Centre – International City – Discovery Gardens
• Boom, bust and market recovery • Speculators vs. end users • Hot(el) real estate (condo suites and apartments)
Jumeirah Islands
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Dubai Airlines • Abu Dhabi and
Oman were joint owners of Gulf Air from 1973 to 2006, when Bahrain bought them out
• Key facts about Emirates airline: – Established 1985 – Owned by Sheikh
Mohammed and managed by Sheikh Ahmed
– Flying 232 aircraft to 147 destinations in 80 countries – In 2013-14, Emirates flew 44.5 million passengers (= World’s No 4 carrier) and
2.3 million tonnes of cargo – Operates all flights to/from Terminal 3 at DXB – In 2013, Emirates made history by ordering 150 Boeing 777X and 50 Airbus
A380 costing US$166 billion • Launched in 2008, low-cost airline flydubai now flies 30 brand new Boeing
737-800 Next Generation aircraft to >85 destinations from DXB Terminal 2 • In 2014, the airline ordered 75 Boeing 737 MAX 8s and 11 Boeing 737-800
aircraft, along with the purchase rights for 25 more Boeing 737 MAX aircraft, at an estimated costs of US$8.8 billion
flydubai safety video featuring Freej cartoon characters
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Dubai Airports 1: Dubai International Airport (DXB) • Base for Emirates and flydubai, secondary hub for Qantas • In 2014, handled >7,000 weekly flights operated by 140 airlines to >250
destinations • Was the world’s 7th busiest passenger hub in 2013, with 66.4 million
passenger movements • Overtook London Heathrow in 2014 as the world’s busiest airport for
international passenger tra!c with 68.9 million passengers compared with 67.8 million at Heathrow (Airports Council International data, 12/14)
• Airport ground handler, Dubai National Air Travel Agency (DNATA), which began in 1959 with 2 sta", now has 17,500 and just opened the Dnata City at Heathrow, with 60 trucks
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A Decade of Passenger Movements Growth at DXB
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Departures Arrivals Transit
CAGR for all passenger movements = 13% per year (21.7m in 2004 to 66.4m in 2013)
000s
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Dubai Airports 2: Maktoum International Airport (DWC) • Main component of 140 km2 the Dubai World Central ‘aerotropolis’, a multi-use
real estate development • Currently operates freight and passenger services from one runway, one
passenger terminal and one cargo terminal • Construction is now underway to convert DWC into the world’s largest airport • The US$32 billion project will create 5 runways, 200 aircraft stands for wide
bodied aircraft, 4 concourses connected via 6 airport trains to 2 terminals, which in turn will be linked to the city’s metro network
• When complete, the mega-hub will have total annual capacity exceeding 200 million passengers and 12 million tonnes of freight
• DWC home to the future 2020 World Expo site
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Other Infrastructure
• E11 Sheikh Zayed Road now 12 lanes in Dubai
• E44 Al Khail, E311 and E611 ring roads have relieved congestion
• 40 more km of main metro network under planning, linking Expo site
• Dedicated Palm Monorail • New tram network just
launched in Dubai Marina/TECOM
• 1,200 km Etihad Rail main line will link the 7 Emirates, eventually to GCC
• Dubai Logistics Corridor at Jebel Ali to become in-bond air-sea-road-rail hub linking JAFZA with DWC
Sheikh Zayed Road
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Tourism • “East meets West” with ‘safe’ version for each of the other • Sun and sand, shopping and night life, English speaking city • Hotels and malls as tourism attractions • DTCPB’s conversion to DTCM in 1997 ensures global ‘top of mind’
awareness (working with Emirates airlines) • Events boost visitor numbers and iron out seasonality:
– Dubai Shopping Festival (January, +/- 4.5 million visitors) – Dubai Summer Surprises (similar concept and visitor numbers) – Ramadan Festival
• Dubai World Trade Centre is Gulf exhibitions capital (>100 shows/year) • Cooperation with Oman o"ers city excitement, rural pleasures • Skiing in the desert! Ski Dubai at the Mall of the Emirates
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PR Machine (usually involves tall buildings!)
Roger Federer serves on the Burj Al Arab helipad
Tom Cruise scales the Burj Khalifa during the filming of Mission Impossible Ghost Protocol
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Copycat Travel Destinations: Key Facts
City/Country Abu Dhabi, UAE Doha, Qatar
Airport Abu Dhabi International Airport Hamad International Airport Passenger Throughput 2013 16.5 million 23.2 million Future Capacity after Expansion 30 million 50 million Airline Etihad Airways Qatar Airways Total Aircraft 105 146 Total Destinations Served 110 146 Airline Passengers 2013 11.5 million 22 million Tourist Board Abu Dhabi Tourism & Culture Authority Qatar Tourism Authority
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Copycat Airports
The future Midfield Terminal at Abu Dhabi International Airport
Hamad International Airport, recently opened
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Letting Unit Distribution by District, 2014
Rooms
Apartments
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Brand Penetration in Dubai Hotel Rooms by District, 2014
Actual Numbers % of Totals
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1960s Owner-operated hotels in
Deira, Bur Dubai
1970s First
international chain hotels
1980s & 1990s
Proliferation of international & regional chain
hotels
1990s SZR district,
Jumeirah beach
‘Riviera’, branded hotel
apartments
2000s Limited service & condo hotels,
The Palm, Downtown, Al
Barsha districts
2010s ‘Mega’ & lifestyle hotels, ‘B&Bs’
50+ Years of Hotel Development in Dubai
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The First Hotels – Airlines Hotel (1958) & Ambassador (1968)
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A Classic Deira Luxury Hotel – Radisson Blu (former Intercon, 1975)
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Iconic Sheikh Zayed Road Tower Hotels – Jumeirah Emirates Towers (2000)
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More Iconic SZR Tower Hotels
L to R: Dusit Thani (2001), Conrad (2013), Fairmont (2001), Shangri-La (2003)
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Downtown Hotels - The Address Downtown (2008), Dubai Mall (2009) & The Palace – The Old Town (2007)
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Jumeirah Beach Hotel (1997), Burj Al Arab (1999) & Madinat Jumeirah (Mina A’Salam, 2003)
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30
80
130
180
230
280
330
380
Dubai Boasts World’s No. 4 ADR! (US $250 @ YTD 07 14)
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Dubai Hotel Guest-Night Origins
% of Guest-Nights at Hotels
% of Guest-Nights at Hotel Apartments
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Condo Hotels • Hotel apartments and most recently,
rooms and suites and are being o"ered for sale freehold in Dubai on a ‘sale & leaseback’ basis
• The Address Downtown and Dubai Mall were the first properties to include ‘condo apartments’ in 2005
• ‘Real estate tourism’ was part of the 2002-8 property boom
• There are 16 existing condo hotels in Dubai, also bearing such brands as Anantara, Armani, Bonnington, Fairmont, Kempinski and Movenpick
• All properties are fully sold out • Sales prices range from US$8,000 -
$12,000/m2
• Known future supply totals 35 new properties
• Damac planning >9,000 rooms in total • Some operators still do not trust the
Dubai Strata Titling Law
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Dubai 2014 Future Confirmed Chain Hotel/ Hotel Apartment Pipeline
Ibis Dubai World Trade Centre extension
Chain Hotels Keys Rank Marriott 10 2,596 1 Starwood 5 2,530 2 The Address 7 2,448 3 Wyndham 3 1,889 4 Rotana 5 1,511 5 Hilton 5 1,505 6 Accor 4 1,390 7 Viceroy 3 1,378 8 Paramount 2 1,047 9 Flora 4 920 10 Hyatt 1 869 11 Premier Inn 3 827 12 MGM 3 692 13 Auris 3 635 14 Rezidor 3 633 15 IHG 2 608 16 Coral 2 532 17 Bin Majid 2 500 18 Citymax 2 495 19 Jumeirah 1 435 20
Chain Hotels Keys Rank Langham 1 323 22 Emirates Grand 1 300 23 Taj 1 296 24 Frasers 2 281 25 Ramee 1 265 26 Baccarat 1 263 27 Blue Bay 2 260 28 Fairmont Ra!es 1 260 29 Rosewood 1 250 30 Teal 1 240 31 Four Seasons 1 237 32 Time 1 234 33 Gulf Hotels 1 230 34 Sunland 1 217 35 Steigenberger 1 215 36 City Seasons 1 208 37 Melia 1 194 38 Millennium 1 151 39 Lotus 1 147 40 Total 94 28,419
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Royal Atlantis Resort (2018?)
Sheikh Mohammed inspects the model
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Viceroy Palm Jumeirah Projected Returns (US$) Particulars 2016 2017 2018
ADR 472 507 545
Occupancy 80% 80% 80%
Revenue Per Room 137,760 148,000 159,200
40% Revenue Share 55,104 59,200 63,680
Standard Room Price 449,795 449,795 449,795
Yield Percentage 12.2% 13.1% 14.1%
Lifestyle Benefits 6,605 7,096 7,096
Source: http://viceroydubai.com/
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Damac Towers by Paramount Hotels & Resorts, Business Bay (2016)
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Future Tower Hotels: Hyatt Regency (2015), Viceroy P17 (2018) & Rosewood (2015)
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Future Pipeline – Unconfirmed Projects at…
• Mohammed bin Rashid City (MBRC), a new district between Business Bay and Meydan, in which up to 100 hotels are planned
• Meraas’ 3 theme parks in Jebel Ali • Dubailand, where many projects that were put on hold during the global
financial crisis are now being completed or revived, including City of Arabia, Dubai Sports City, Dubai Lifestyle City, Falcon City of Wonders
• Nakheel’s Deira Islands, the first phase of the Palm Deira project • Dubai Creek Harbour at The Lagoons, one of several major mega projects
planned in and around Dubai Creek • PLUS Likely impact of DTCM incentives for developers of 3- and 4-star hotels,
targeting 35,000 keys in time for Expo 2020
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Other Future Demand Considerations
• With US$315 billion of construction projects confirmed by EC Harris in August 2014, the UAE real estate sector has rebounded strongly since the global financial crisis
• Solid underlying economic fundamentals including low interest rates, high oil prices (getting lower) and a successful economic diversification policy are combined with the country’s status as a financial safe haven in a region where some other nations remain notably destabilised due to the Arab Spring
• Tourism accounted for nearly 20% of Dubai’s GDP in 2013 • This figure that is forecast to grow by between 7 and 9% per year
up to 2020, according to the DTCM, by which year the government’s aim is to increase tourist arrivals to 20 million (independently of the 25 million expected to visit the World Expo)
• Goals aided by fantastic infrastructure, especially airports and airlines
• The Arab Spring has caused erstwhile competing tourism destinations like Egypt, Syria, Lebanon and Jordan to be largely closed for business as regards international tourism, including intra-regional holiday tra!c from the Gulf, much of which has transferred to Dubai (although Egypt is recovering, e.g., at Sharm El Sheikh)
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Key Facts: Expo 2020 vs FIFA World Cup 2022
Off ic ia l Name W orld Expo 2020 Dubai F IFA W orld Cup 2022 Location Dubai World Central, Jebel Ali Stadiums across Qatar (all but one
within 60 km, making this the most compact World Cup in history)
Duration 24 weeks 3 weeks Dates 20 10 20 - 10 04 21 Summer or winter? TBC in 02 2015 Expected visitors 25 million (DTCM) 1 million (Qatar 2022 Supreme
Committee/Supreme Committee for Delivery & Legacy)
Key activities Multiple events staged at multiple national pavilions (70 in Shanghai 2010) representing the world’s nations
64 football matches
Key facilities 150-hectare exhibition site to form part of the 140 km2 Dubai World Central (DWC) ‘aerotropolis’
8 stadiums (was to be 12); 64 team base camps, 32 training facilities
Related infrastructure 100 new hotels (min), new metro line, new areas of DWC, new Jebel Ali theme parks, revival of mega projects in Dubailand
55,000 new hotel rooms, new metro, new railway, new airport, new port, new urban districts, etc, etc
Legacy ‘Legacy’ housing project will use site
Upper tiers of 9 stadiums will be donated to third world countries
!
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Footnote: Related Social Issues
• Emiratisation vs expatriates’ and labourers’ rights
• UAE nationals in workforce and hotels
• Women in business and hotels • Doing business under a monarchy • Family companies vs global
corporations • Aristocracy vs meritocracy • Freehold home owners creating
grass-roots democracy • Islam in business and banking • Sharia-compliant and dry hotels • The role of demolition and land
reclamation in city expansion
Prince Charles and Sheikha Mozah of Qatar
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Thanks for listening
Tel +971 3 344 3734 Fax +971 4 344 0907
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Contact Viability Management Consultants
Guy Wilkinson Managing Partner Viability Management Consultants PO Box 191234 Dubai United Arab Emirates Email: [email protected] Mobile: +971 50 450 6276 Tel: +971 4 344 3734 Fax: +971 4 344 0907 Web site: www.viability.ae